Summer trading continues as volume continues to be very light. However, price action is not being kind to longs at the moment. The morning’s gains quickly evaporated after the European close as the market as unable to find enough buyers to support higher prices. Economic data will be non-existent until Wednesday’s release of Existing Home Sales and the FOMC meeting minutes. AAPL and GOOG held up the NASDAQ from the kind of losses posted by the S&P 500 and Dow. Financials were weak, but weren’t the weakest group and that honor would go to Oil and Gas names. The market is finding it rather difficult to sustain a rally here and we’ll need to see some bullish support for this market to regain its footing.
In the short-term here we are in the realm of being oversold. This does not necessarily mean we can’t go lower, but the market could be in for a quick rally in reaction to the most recent selling. Trying to pin point a market turn is damn near impossible and attempting to capitalize will most likely end in your account losing significant capital. Many will blame the move in the 10 year Treasury yield on “The Taper.” How anyone knows the precise reason is beyond us, but we do know Yields have jumped quite a bit in the last few months. Shorting treasuries have been a profitable trade. Know price movement and how you are going to react is more important than knowing the “reason” why something moved.
Sellers piled up at the day’s close pushing the markets to their lows of the session. Small cap stocks measured by the Russell 2000 really had a weak day. The Russell 2000 has been down 5 days in a row and down 6 out of the last 7 days! In addition, the index lost its 50 day moving average. Another crucial index lost its 50 day moving average and that was the S&P 500. In June, it lost its 50 day in big volume. However, a few weeks later the market was able to regain its footing and push the major index above the crucial moving average. It’ll be important for the overall trend on how we react around the 50 day moving average.
Not the start to the week those who are long were looking for. Tomorrow will be a new day and perhaps Tuesday can regain its “turnaround” status. Cut those losses and ride those winners.
